What’s the matter with Kansas? According to the Securities and Exchange Commission, the answer is fraud in the pension system.
In an unusual step, the SEC has filed fraud charges against the state of Kansas for not properly disclosing funding problems with the state’s public pension system. The state is accused of not disclosing the problems in its bond issues in 2009 and 2010, according to a report from CNBC.com.
According to the federal indictment, Kansas had “significant unfunded liability,” which threatened investor repayment. The state put $273 million in the bond market without disclosing the pension system was undercapitalized.
“Kansas failed to adequately disclose its multi-billion dollar pension liability in bond offering documents, leaving investors with an incomplete pictureof the state’s finances and its ability to repay the bonds amid competing strains on the state budget,” said LeeAnn Ghazil Gaunt, of the SEC’s enforcement unit on municipal securities and public pensions.
Kansas is the third state to be sued by the SEC for violating public bond disclosure regulations. In 2010, New Jersey was charged, and in 2013 the state of Illinois was sued by the federal agency.